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France imposes €1 billion bail on HSBC for criminal tax probe

HSBC said in a statement Thursday that French magistrates ordered a formal criminal investigation (“mise en examen”) into HSBC’s Swiss Private Bank for alleged tax-related offenses.

The statement said bail of €1 billion ($1.075 billion) was imposed.

“HSBC Holdings plc believes the French magistrates’ decision is without legal basis and the bail is unwarranted and excessive,” the statement said. “It intends to appeal and will defend itself vigorously in any future proceedings.”

The conduct in question happened in 2006 and 2007, HSBC said.

In February, prosecutors in Switzerland searched the offices of HSBC’s private bank in Geneva. Prosecutor’s said they opened a criminal inquiry into possible money laundering against HSBC Private Bank (Suisse).

Hervé Falciani, a former HSBC employee in Switzerland in 2007, leaked documents that included the names of 130,000 account holders allegedly evading taxes in several countries.

The International Consortium of Investigative Journalists said in a report released in February this year that employees at the bank promised customers that their account information wouldn’t be released to tax authorities in their home countries.

HSBC Holdings plc is headquartered in London.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here

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3 Comments

  1. What the French Magistrate should have questioned is the integrity of the then heads of the bank (Directors and Top Management). Whereas HCBC as an institution is all exposed to risk i want to believe that notwithstanding the management practice at the time, covering up of dirty money or tax evasion has become the institutional policy.
    What i instead believe is that the misconduct is/was on the part of individual managers who were in pursuit of individual selfish goals and targets undermining and risking the institution.
    The French Magistrate's decision thus would affect up to the grassroot stakeholders of the institution who are at best unaware of the operational details and decisions made yet the managers should be held personally liable.
    I'd say, wrong move Mr. Magistrate, jail or fine the top managers since they were giving orders to meeting own goals BUT not the organisation!

  2. While I understand the desire of commentator JRS to see individual wrongdoing identified and punished, I disagree that the magistrate has made a mistake pursuing the institution. First, French law has a different legal standard for institutional guilt than the higher standard required for conviction of individuals for some types of crimes. Second, the charge against the company doesn't preclude later charges against individuals whose conduct is uncovered during the probe and may even be intended as a vehicle for such investigation. In this sense, a series of recent set-backs to French prosecutors in similar cases has to have forced them to rethink their strategy on financial crimes cases. Finally, the mis en examen is not a conviction (it is not even really correct to call it an "indictment") – if the acts cited can be isolated away from responsible management, the organization will be exonerated. By the same logic, however, because French corporate law so closely identifies the acts of an organization with the acts of its top management (through a system of delegation of power), there is often no effective difference between the guilt of an organization and that of its top management.

  3. For years companies (other than U.S. companies) had the ability to treat bribes and kickbacks as tax deductible business expenses. These were companies declaring these deductions not individual managers or individual executives. Presumably there was a business case to be made, a profit to be made from this conduct, that these clever business types would then pat themselves on the back and the companies would then promote them for. Fast forward a few decades, these corrupt bargains have returned to haunt these companies, and now the companies say "it is not us, it is these bad apples, we had no knowledge of this" I find that argument to be a little lame and totally self serving. I expect the French Magistrate has a few grey whiskers and a memory.


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